Renewable Energy to meet 49% power needs in India by 2040

The renewable energy grew at a CAGR of 19.78 per cent between FY14-18. The Government of India has a target to achieve 225 GW of renewable energy capacity by 2022, which is higher than its target of 175 GW at Paris Agreement.

Definition / Scope
Market Overview
Top Market Opportunities
Market Drivers
Industry Challenges
Pricing Trends
Regulatory Trends
Other Key Market Trends
Market Size and Forecast
Market Outlook
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

Renewable energy is form of an energy source that is replaced rapidly by a natural process such as sunshine, water, wind, and geothermal heat flows. It means that we can use renewable energy as much as we want without worrying about them running out.

Renewable energy plays an important role in reducing greenhouse gas emissions as they are much more environment friendly than non renewable energy sources like fossil fuels.

Market Overview

The renewable energy industry in India is the fourth most lucrative renewable energy market in the world. India is ranked as fourth in EY Renewable Energy Country Attractive Index 2018.
India ranks in the fourth place in the world in terms of installed wind power capacity.
India contributes 4.43 per cent to the global renewable generation capacity and accounts for nearly 4 per cent of the total global electricity generation.
India has an electricity-GDP elasticity ratio of 0.8.
Renewable energy sources are projected to meet 40 per cent of India’s power needs by 2030.

Top Market Opportunities

Northern India is expected to become the hub for renewable energy with a potential capacity of 363 GW.
In order to reach the target of Ministry of New and Renewable Energy to set up renewable energy capacities to 175 GW, India will need investments of around US$ 125 billion.
India is estimated to have renewable energy potential of 900GW from solar energy, wind power, bio energy and small hydro.
There in an estimated potential of nearly 8,000 MV of tidal energy.
The demand of the power is continuously rising in India. It is projected that India will require added power supply capacity of 450 GW by 2034.

Market Drivers

FDI

The inflows of FDI in the Indian non-conventional energy sector stood at US$ 6.84 billion between April 2000 and June 2018, as per the data released by the Department of Industrial Policy and Promotion. Since 2014, more than US$ 42 billion has been invested in India’s renewable energy sector.

Government Initiatives

The GOI has set an ambitious target to set up 175 GW of renewable energy capacity by 2022 as per the Paris Agreement. However, GOI is now aiming to surpass its previous target and achieve 225 GW of renewable energy capacity by 2022. As a part of Ministry of New and Renewable Energy’s Solar Cities program, 60 solar cities will be developed in India.

Favorable Policies

The renewable energy projects are included in priority sector lending. It is also cheaper than other sources of credit. Various policies are formulated for all sub sectors under renewable energy. Additionally, fiscal incentives are provided in order to promote renewable energy.

Robust Demand

The demand of the power is rising at a fast pace in India. It is projected that the demand of power will rise to 295 GW by 2021-22 and 690 GW by 2035-36.

Industry Challenges

The key off-takers for most renewable projects in India are state owned distribution companies. These firms usually has weak financial profiles and weak credit quality. This presents challenge for developers such as Neerg Energy Ltd.
According to one of the reports by Bloomberg New Energy Finance, India will require US$ 100 billion in asset financing for renewable energy over the six years. This seems highly doubtful, considering the present financial structure of India.
Renewable energy helps to meet energy need but doesn’t help to meet peak hour demands. The electricity demand is high during the evening time when the sun does not shine. The solar’s PV output is almost zero during the evening time.
The renewable energy market is growing in India due to government initiatives, targets, supports, and economics. The market is hardly growing due to consumer demand for renewable energy.
Land is a limited resource and per capital land availability is very low in India. There might be competition for the utility of the land between exclusive installation of solar cells and other necessities that requires land.

Pricing Trends

The players in the solar sector have started bidding at lower prices due to the increasing competition and increasing FDI. The solar tariffs reached record low of US$ 0.04 per unit in May 2017.
The wind power tariff reached record low of US$ 0.038 in 500 MW reverse auctions by Gujarat Urja Vikas Nigam Ltd. in December 2017.
The floor price of the Renewable Purchase Obligations has been set at US$ 144 per MW.

Regulatory Trends

Under the National Biogas and Manure Management Programme, about 4.96 million household biogas plants were installed in India by the end of 2016-17.
In order to cut down emission level by 33 per cent by 2030, the Indian Railway is taking actions through sustained energy efficient measures and maximum use of clean fuel.
The Ministry of New and Renewable Energy has taken decision to provide custom and excise duty benefits to the solar rooftop sector.
In order to boost hydro projects in India, a new Hydropower policy for 2018-28 has been drafted.
The GOI has declared plans to implement a US$ 238 million National Mission on advanced ultra-supercritical technologies for cleaner coal utilization.

Other Key Market Trends

The falling cost has made solar PV the largest market for new investment. Further, zero import duty on components used in making solar panel was declared to lift domestic solar panel under Union Budget 2018-19.
The world’s largest solar park names ‘Shakti Sthala’ was launched in Karnataka in March 2018 with an investment of US$ 2.55 billion.
The replacement of coal plants with renewable sources is estimated to save India US$ 8.4 billion annually due to reduced power costs.

Market Size and Forecast

Installed renewable power generation capacity has expanded at a CAGR of 9.29 per cent over FY08-18.
India recorded 11,788 MW of renewable energy capacity in 2017-18 and 1,832.26 MW in April-July 2018.
The total renewable power generation installed capacity stood at 116.82 GW in India as of July 2018. This is 33.81 per cent of the total installed capacity of 345.49 GW.
The solar installation increased by 34 per cent during January-March 2018.
Installed capacity from hydel projects in India increases to 45.5 GW in September 2018 from 35.9 GW in March. The capacity from small hydel plants increased to more than four times in the same period.

Market Outlook

The energy demand of India is expected to reach 15,820 TWh by 2040, in which the role of renewable energy is set to be vital.
The Ministry of New and Renewable Energy has set target to install renewable energy capacities to 175 GW by 2022. Out of 175 GW, 100 GW is aimed for solar, 60 for wind and rest for hydro, bio and other.
By 2040, it is estimated that 49 per cent of the total electricity will be generated by the renewable energy.
Solar installation is expected to increase 360 per cent by 2020.
By 2030, renewable sources are projected to meet 40 per cent of India’s power needs.

Competitive Factors

India receives sunlight throughout the year. India is one of the best recipients of solar energy due to its favorable solar belt and closeness to the equator.
There is immense hydro power potential in the north-eastern states of the country.
The world’s largest ground based solar power and world’s largest rooftop solar plant both are in India.
India has the fourth wind power capacity and sixth largest solar power capacity in the world.

Key Market Players

The key players in the market are as follows:

ReNew Power Ventures

The company is engaged in the generation of non-conventional energy through solar and wind power. It is India’s largest renewable energy independent power producer with a capacity of more than 5,800 MW of wind and solar power assets.

Tata Power Solar

It is a part of the Tata Group which has three business segments – manufacturing of solar cells and modules, engineering, procurement and construction for solar power projects and other solar products. It is the leading and largest integrated solar player in India.

Suzlon

It is vertically integrated, future-ready turbine manufacturer. It is present in 18 countries across six continents. It has the largest installed wind energy capacity in India and installed 626 MW of capacity in FY18.

Strategic Conclusion

There has been an increase in percentage contribution of renewable energy to total installed capacity over the past few years. The economic growth, increasing urbanization, and rising per capita energy consumption is driving the demand for energy in India.

The Government of India is also setting up various targets, coming up with policies, taking initiatives to increase use of clean energy and undertaking various large-scale sustainable power projects. By 2040, it is expected that nearly 49 per cent of the total electricity will be generated by the renewable energy.

Appendix

CAGR – Compound Annual Growth Rate
FDI – Foreign Direct Investment
FY – Fiscal Year
GDP – Gross Domestic Product
GOI – Government of India
GW – Gigawatt
MW – Megawatt
USD – Unites States Dollar